Online payment systems for retailers: an overview of the advantages and disadvantages
The term e-payment, or online payment, is closely linked to e-commerce. E-Payment refers to the processing of payments via Internet. It is usually used to pay for goods or services purchased online. A variety of payment methods and e-wallets are available for online payment.
Traditional payment methods include invoicing, cash, direct debit, debit card and credit card payments. Modern online payment methods include e-wallets giant PayPal, SOFORT or Amazon Pay. Other alternative payment methods, such as the prepaid method, installment purchase or cash payment methods, are used in specific segments of e-commerce or in specific geographies.
From a retailer perspective, payment methods are mainly selected based on cost, risks and customer acceptance. For online businesses, safety is a decisive criteria. The technical handling of the methods varies. Customers might be redirected to an external website, requiring a login, or the payment data can be directly typed into an SSL-encrypted form on the online shop. Alternatively, payment can be made prior or after the receipt of goods. Credit card acceptance requires compliance with the PCI DSS security standard for processing credit card data.
Over the past four years, the number of payment methods offered by merchants has increased from 5.5 to 6.1. (Source: ECC Payment Study Vol. 21) In the last two years alone, half of merchants included new payment methods to their shops. Traders have realized that this is an opportunity to increase the conversion rate. Invoice payment as well as direct debits, both very safe payment methods benefiting from a good popularity among customers, are increasingly integrated by online shops. Service providers in this area usually provide merchants with a payment guarantee and take over the processing (for example credit check, reminder, collection procedure).
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